Saturday, May 24, 2014

Treasuries Speak In Sign Language


The chart below is a year-to-date (as of 5/23/14) look at 10-year US Treasury prices in green and the Russell 2000 in blue. Clearly the better investment so far has been Treasuries. The 10-year is up 2% so far while the Russell is still down over 3% for the year. We must ponder. If the economy is so good (as the US regime claims), then why are US stock indices either down or flat for the year while Treasury notes are up? Look at the chart and then read on.

YTD - RUT in blue, UST in green
Chart courtesy

While we can’t argue with the chart, we must strive to understand what the chart is telling us. As most readers know, almost all investment pundits have been calling for a rise in interest rates. Pundits are invariably completely ignorant repeaters of stories they do not understand. I wrote an article in 2010 detailing the reasons that all US Treasuries will eventually yield nothing. I am led to this conclusion by the truth.

Hey, come back. I didn’t mean to scare american readers with the truth. God knows that one could chase the average american to the other side of the Sun with the truth. But please readers, pull your skirts up, put in a mouth piece, and learn the truth. Here it is. 

The US government (taxpayers) are $18 trillion in debt already. What will rising interest rates cost an already bankrupt country?

Spain leads the world in home ownership. 92% of their mortgages are of the adjustable rate variety. The unemployment rate is nearly 30%. What will rising interest rates do to the Spanish economy? 

Housing in the US is, well, whatever we believe it to be. God knows the US regime is completely incapable and totally unwilling to tell the public the truth about anything. But I think we could all agree that housing is not yet robust. Housing starts are still barely a third of what they were ten years ago. 30-year mortgages are now averaging about 4.1%. If housing is not strong with borrowing rates at 4.1%, what will it look like if interest rates rise?

I could go on and on but one would have to be an ignoramus of Pelosi proportion to even entertain the notion of rising interest rates. They can’t go up. It will not be allowed.

Ah, there is the key word. ‘Allowed’. We must all recognize that there are no longer ‘markets’ of any kind that allow participants the liberty of price discovery. Ah, there is another key word - ‘liberty’. No, no, no. The Federal Reserve Bank now sets prices for everything that the rest of us are too stupid to determine for ourselves. Or, the Fed sets prices because they are both fraudulent in their operation and criminal in their intent. The Fed ‘allows’ us to do things since they are the master and we are the slave.

As for the chart, we must look beyond the lines. For instance, a large institution sold more than $141 billion in Treasuries over a one-week period (as reported by Dr. Paul Craig Roberts) earlier this year. Since selling Treasuries can push interest rates higher, the Federal Reserve stepped in to purchase these bonds. Only, they did it through Belgium so as not to alarm anyone as to the Fed’s fraud. Obviously, heavy selling makes the line on the chart fall and heavy buying makes the line rise. To be clear, there is no longer a ‘market’ of buyers and sellers setting prices. The Fed steals money from the Treasury and buys assets as they see fit. Therefore, we cannot completely trust the lines on a chart unless we know the truth behind those lines. The Fed carries on their criminal intent by deceiving the rest of the world. 

So why doesn’t the Fed buy up the Russell 2000? The answer is that the Fed is mainly interested in manipulating the Dow higher since it is the most watched stock index. The Dow is now barely into positive territory for the year. Interestingly, the Russell 2000 actually fell into ‘correction’ territory about a week ago. When it did, I personally bought some. Why? Because I see value? Please! The financial networks began to chirp about it. It was as if the financial networks turned their broadcasts toward the Federal Reserve Building and announced, “The Russell is now in correction territory.” Nothing happened momentarily. The media cleared their throat. “Eeggheemmm. I say, Ms. Yellen, the Russell is in correction territory.”

As completely expected, the next day Fed Chair Aunt Clara flew into action. The Russell has been the big gainer over the last few days. Go figure. The key is no longer to know anything about investing or stocks or fundamentals. The key is to know what the criminals are going to do. 

Clearly the criminals that perpetuate the farce of an economy that we have want to protect their portfolio. The Fed has over a trillion of our stolen money, or credit, in Treasuries as they continue to manipulate interest rates lower. They are not going to let Russia or anybody else sell Treasuries, drive up rates, and destroy the Fed portfolio. Interest rates will continue to fall. The Russell will likely catch up to the Dow and then move beyond as momentum kicks in. No, there are no longer any markets. We are now witnessing a game of 3-card Monty and we have to decide on whether to bet on the shill or the mark. And just for clarification, Wall Street is the shill and america is the mark.  

If Treasuries are speaking to us, they are using sign language. What the media tells us and what the charts tell us is not the whole truth. We must understand what is behind the lines. Chart lines are drawn by trading activity but we must know that these lines are now puppets of the Fed. While the charts may imply a particular meaning, we must understand the real signing that is going on. The Fed is now using chart lines to keep us in check. 

Disclaimer: The views discussed in this article are solely the opinion of the writer and have been presented for educational purposes. They are not meant to serve as individual investment advice and should not be taken as such. This is not a solicitation to buy or sell anything. Readers should consult their registered financial representative to determine the suitability of any investment strategies undertaken or implemented. BMF Investments, Inc. assumes no liability nor credit for any actions taken based on this article.